It’s the 1990s Again

It may have become tiresome to hear AI or see it peppered across every earnings call, but from a fundamental perspective, it is providing a productivity boost and retooling of the economy much like the internet did in the 1990s.

A driver of that magnitude is one that cannot be ignored. However, with technology shifting so rapidly, our most effective tool is price and, more specifically, Relative Strength, to gauge how investors closest to the action are deploying capital in real time.

However, to have a playbook to operate from, it is helpful to analyze where we may currently lie within the 1990s bull market trajectory. Early years of the internet bull saw gains primarily from internet infrastructure stocks vs. consumer products, as the infrastructure backbone had to be built before the likes of Yahoo or AOL could fly. Looking at the AI winners of the moment, we see a striking similarity, as most winning stocks are not household names, but rather technology companies supplying infrastructure on which AI is being built.

In terms of time, this leads us to the mid-1990s where the internet was not new, but it was also not yet pervasive or fully relied upon as it is today. Price action is also similar.

After a powerful 50%+ rally from the depths of the 1994 correction, the Nasdaq corrected 10% over 88 trading sessions. Similarly, 2025 saw a 62% market rally over 142 trading sessions, followed by a similar 13% correction. It is worth mentioning, the 62% gain is accentuated by the more panicked drop at the depths of the Tariff Panic selloff. It is also worth noting that both corrections saw an attempted breakout to new highs midway and ultimately corrected to or below their 200-day average.

Not visible on these charts was the tremendous strength in leading growth stocks of the 1990s, which fully matches what we see today.

Signs the Bottom is In - Price and Volume

Before we take the 1996 precedent as a certainty, we need real-time data suggesting we have moved back into an uptrend. My preference is to incorporate different pieces of data to build a more robust view of the current market.

One of my preferred trend tools is the 20-day Up/Down volume ratio on the QQQ, which has turned back to “positive” with a reading above 1, suggesting more up than down volume over the last month.

Signs the Bottom is In – Intermarket Analysis

Moving past simply analyzing the indexes, a view on intermarket relationships helps us to understand how investors are positioning within the market itself. By looking at consumer staples vs. the QQQ, we can visualize if investors prefer safety or opportunity.

By applying a 50-day SMA to the XLP/QQQ ratio, we can view the trend of risk-on vs. risk-off. Interestingly, investors began positioning for safety long before Iran headlines crept to the surface. Equally as interesting, investors began repositioning toward risk-on assets days ago, with the ratio moving below its 50-day SMA and signaling a risk-on environment only two days from the bottom.

VIAV – The Little-Known Market Leader

As AI infrastructure spending surges, it is important to get the most out of that spend. AI data centers are becoming increasingly complex to build and run, and it is vital to have thorough testing before implementing these massive data systems.

VIAV provides testing equipment for the red-hot photonics group. As data speed requirements increase, technology is moving to new and faster standards. This is resulting in a whole new upgrade cycle powering VIAV.

Relative Strength (RS) is our best tool for isolating pressing demand, and my preferred method is a simple close-only comparison vs. the QQQ. As you can see, VIAV resisted all weakness and also moved first to new highs. These two criteria define a true market leader.

Though short term extended, VIAV remains a primary focus to accumulated on any market weakness.

MRVL – A Mature Stock Riding a New Wave

Perhaps VIAV’s strength and upward extension may be off-putting for some. MRVL, by comparison, is only now breaking away from a sizeable multi-month base. As a semiconductor company focused on efficiently moving data, it is seeing a tremendous demand wave from the AI buildout. A recent $2B NVDA investment also confirmed the GPU leader saw MRVL as a partner rather than a competitor.

Benefiting from supplying tools to the same data bottleneck as VIAV, MRVL has likewise resisted general market weakness throughout the Middle East conflict and has been one of the first stocks to race to new highs as market pressure abated. You can easily see MRVL make higher lows against the market’s lower lows, indicating institutional accumulation amidst the cover of market worries. It is also a clear new leader in this new market uptrend.

Like VIAV, MRVL is currently shorter term extended but remains a primary focus in this uptrend. Extension at the start of a new uptrend is far different than being extended after months of a market uptrend. Rather, initial stock extension off a correction low typically isolates the stocks under most pressing demand. Pullbacks tend to be shorter and shallower than most expect as investors continue to rush in to buy at every opportunity.

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